White House Considers Former Bush-Era Economists for Fed No. 2 Job

The White House has interviewed two economists who served in senior positions in the George W. Bush administration to serve as the vice chairman of the Federal Reserve Board, according to people familiar with the matter.

The two are Richard Clarida, a managing director at money manager Pimco who is also a professor of economics and international affairs at Columbia University, and Lawrence Lindsey, who runs an economic-advisory firm in Washington.

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Mr. Clarida served as assistant secretary for economic policy at the Treasury Department from 2002 to 2003. Mr. Lindsey was a top economic adviser to Mr. Bush from 2001 to 2002 and served as a governor on the Fed's board from 1991 to 1997. Both men would satisfy the Trump administration's desire to fill the vice-chair post with an economist with a strong grounding in monetary policy.

The Trump administration is also considering Mohamed El-Erian, the former chief executive of Pimco and a former deputy director of the International Monetary Fund.

It isn't clear whether there are other candidates, or when a final nominee may be named. The process of selecting the central bank's No. 2 official began in earnest last month after President Donald Trump nominated Fed governor Jerome Powell to succeed Fed Chairwoman Janet Yellen when her term expires in February.

Mr. Powell has served on the Fed's board since 2012 but will be the first non-economist to lead the central bank in nearly four decades. Investors have been hungry for clues about how closely Mr. Powell and Mr. Trump's other nominees will hew to Ms. Yellen's policy of slowly raising interest rates from very low levels.

While Mr. Powell's views on monetary policy are largely in line with Ms. Yellen's, the role of vice chair has taken on greater importance because Mr. Powell had little background in monetary policy until this decade, and because Mr. Trump will have an opportunity to replace half of the Fed's seven-member board over the coming year.

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Ms. Yellen has said she will resign her seat as a governor when her term as chair ends on Feb. 3 and her successor is sworn in. That will give Mr. Trump up to four vacancies on the Fed's board. Besides Ms. Yellen, the Fed's board only has one other Ph.D. economist, Lael Brainard, who was nominated by President Barack Obama.

Mr. Trump has nominated Marvin Goodfriend, an economist at Carnegie Mellon University, to fill one of the vacant board seats.

Both men are well-credentialed economists who have done scholarly work on or have real-world experience in central banking, and both have appeared frequently in the media commenting on the Fed and monetary policy.

In recent months, Mr. Clarida has spoken favorably in interviews about the direction of monetary policy under Ms. Yellen this year. The Obama administration considered nominating Mr. Clarida to a vacant Fed seat in 2011, but he withdrew from consideration and the Obama administration ultimately selected Mr. Powell for that seat.

As a Fed official in 1996, Mr. Lindsey warned of a stock-market bubble and said the Fed had an obligation to prevent the bubble from growing out of control. Mr. Lindsey was chided by his colleagues during the Bush administration for estimating a relatively high price tag for the Iraq War in the run-up to the 2003 invasion, a forecast that proved prescient when the final cost easily outpaced all estimates.

While the White House controls the nomination of the vice chair, officials are likely to ensure that their nominee can work well with Mr. Powell.

Earlier this year, Mr. Trump nominated another veteran of the George W. Bush administration, Randal Quarles, as the Fed's vice chairman of supervision. He was confirmed by the Senate earlier this year and took office in October. Mr. Lindsey served as a policy adviser in the George H.W. Bush administration, where Messrs. Powell and Quarles also served in top Treasury posts.

The Wall Street Journal reported Mr. El-Erian's potential candidacy last month. Mr. El-Erian is also considered by many Fed watchers to be a potential candidate to lead the New York Fed, which will name a new president next year. He has master's and doctorate degrees in economics from Oxford University and has spoken and written frequently in recent years on monetary, regulatory and fiscal policy, including publishing a bestselling book on central banks last year titled, "The Only Game In Town."

In recent years, Mr. El-Erian has voiced somewhat hawkish critiques of the Fed's policy stance, including decisions to hold interest rates at ultralow levels despite signaling plans to raise them. In recent months, he has suggested that the Fed's inflation target of 2% might be too high given structural forces holding down consumer prices.

Write to Nick Timiraos at nick.timiraos@wsj.com and Peter Nicholas at peter.nicholas@wsj.com